Inflation in essence implies "too much money chasing too few goods". Inflation is a condition of continuously increase in the price level. It affects individuals, businesses & the government. Inflation has been generally regarded as an important problem to be solved and a primary concern for the policymakers. Two types of changes can be caused by inflation. First, there may be a temporary burst of inflation as the general price level changes from one equilibrium level to another. Secondly, there may be a continuos change in the level of prices. Inflation that is caused by shifts in aggregate demand must be distinguished from inflation that is caused by shifts in aggregate supply.
